When will global milk production hit a tipping point?
With global milk prices falling, the question is when will key exporting countries reach a tipping point where production starts to dip.
The overnight GDT auction saw the index rise 0.5% over the previous auction.
However, whole milk powder prices eased 0.7% in last night’s auction, their second consecutive fall.
Westpac dairy analyst Anne Boniface says a feature of recent months has been renewed strength in fats prices; this continued in last night’s auction.
AMF prices are now up 19% since the start of the year and 34% from their November lows, while butter prices have risen an even more impressive 36% this year and are 52% above their November 2018 lows.
“While prices for both are below the record levels they reached in 2017, demand appears to be remaining robust even at these levels,” says Boniface.
“Over time, we would expect the relative prices of milk fat and protein to return to average levels, as manufacturers increase production of whichever products generate better returns (whole milk powder or skim milk powder and fats). That increased supply will put downward pressure on prices, however divergence can persist for an extended period.”
Commenting on the WMP price dip, Boniface says this may be some of the supply premium coming out of prices as concern about the impact of dry weather on NZ milk production eases.
“While soil moisture deficits in parts of the country remain worse than average for this time of the year, they are not as acute as we saw a few weeks ago.”
Key results
AMF index up 4.2%, average price US$6,126/MT
Butter index up 3.5%, average price US$5,544/MT
BMP not offered
Ched index up 1.4%, average price US$4,319/MT
LAC index down 3.4%, average price US$912/MT
RenCas index down 2.4%, average price US$6,460/MT
SMP index up 0.2%, average price US$2,462/MT
SWP index not available, average price not available
WMP index down 0.7%, average price US$3,269/MT
